Mediating Business Disputes

2015 statistics show there are over 123,000 small businesses (19 employees or less) in Massachusetts, representing some 86% of all firms in the Commonwealth. Small business owners are as likely as large corporations to become entangled in disputes with their customers, vendors, employees, other businesses or even their own business partners. Unlike many larger corporations, small businesses often do not have the budget, human resources and legal departments to deal with these conflicts. For many business owners, one protracted legal case can put them out of business. They need to avoid the expense, delay, uncertainty, aggravation and lack of control that is associated with having to go to court.

Mediation offers business owners, both small and large, an effective alternative to litigation in the courts and more and more business are turning to alternative dispute resolution (ADR) to resolve their disputes efficiently, economically and effectively. An experienced neutral mediator can carefully sculpt and manage a settlement process whereby the business dispute, whether large or small, is viewed against the backdrop of the true business interests and practical considerations of all involved , and put the focus on options for mutual gain and agreement. At MDRS, approximately 90% of all business disputes that come to mediation reach a mutually agreed upon settlement.

Time and Cost savings

“Time is money says the proverb, but turn it around and you get a precious truth. Money is time.” George Gissing

Who can relate to this truism more than a small business owner in today’s economy? To divert precious time and diminished resources to a contentious business dispute is not what a seasoned owner wants or needs. Mediation will likely result in the resolution of a business dispute and save considerable time and money through the avoidance of protracted litigation. Settling a business dispute by mediation can occur in a matter of hours or days, and not years, as would be involved in court proceedings. Mediation fees and costs are a small fraction of the costs associated with litigation, which involve high costs for attorney fees, discovery costs during litigation, expert witnesses and potential appeal costs. A successful mediation will allow business owners and their staff to again focus on running their operations and earning their livings.

Risk management and control over the process and the outcome

Trial in the court system is unfortunately focused on winners and losers. The major difference between mediation and litigation is that settling through mediation is a voluntary agreement between the parties, in contrast to litigation that results in a binding decision outside of the parties’ control. Too often, when a business transaction fails or a relationship sours, a business owner thinks, “we need to go to court.” In going that route they are accepting loss of control over outcomes.

Mediation provides a framework that strengthens the ability of business people to adjust relations and resolve problems efficiently and effectively—without losing control of the outcome to a judge or jury. The parties themselves will jointly select the mediator and determine the issues the mediator will assist the parties in resolving. The parties will also select mutually agreeable times to meet with the mediator.

Importantly, the mediator has no power to impose a solution upon the parties, although in some cases a mediator may propose solutions. The resolution of the dispute can only result from a voluntary agreement between the parties. Mediation has been called the thinking business person’s process of choice where control of the outcome sits with them, and not a judge or jury.

Whether occurring before or after the filing of a civil complaint, mediation permits parties to engage in a carefully managed settlement event in which the dispute is viewed against the backdrop of broad business interests, practical considerations, and options for mutual gain, a win-win approach and not winner take all.

In many business disputes, the risks involved are not limited only to winning or losing a monetary judgment, but also could involve loss of reputation, pride, position, having to divert precious human resources, employee time and attention from other more important matters, strained customer relations, bad publicity, aggravation and the like.

Studies consistently show that parties report high levels of satisfaction with private mediation and only moderate to poor satisfaction with resolution by way of litigation and trial.

A neutral third party experienced in fostering communication and resolving even the most difficult business disputes

Many business owners may ask “Why do I need a mediator, when I’ve made my living negotiating my own deals?“

Mediation with an experienced neutral provides distinct advantages over unaided face-to-face negotiation without a mediator. Due to the mediator’s unique and neutral role, they can challenge parties’ assumptions and help the parties craft a solution that they might not otherwise have found. The mediator does not decide who is right or wrong or issue a judgment in favor of one party. The mediator’s function is to create an effective process, gather information and assist in problem solving. Mediators routinely help parties confront the hard realities of their established positions, highlighting weaknesses and drawing attention to the compounding of risks and costs that accompany litigation or arbitration. The mediator can help parties transition from justifying their positions on the issues to defining their interests and objectives and harmonizing them.

In the course of a dispute, business managers, their employees and at times even their counsel, become emotionally invested in their position. When a dispute arises, owners and their employees directly involved can feel resentment, anger, betrayal, and a desire to retaliate. Negative emotions sometimes can have a significant influence on the parties’ attitudes towards resolution. Part of the role of a mediator is to bring the parties together in an environment that permits them to vent and blow off steam while establishing new and more constructive ways of interacting. Effective mediators reduce or eliminate the extent to which emotional factors hinder acceptance of otherwise reasonable settlement terms.

A confidential process and outcome

The mediation process is confidential and governed by statutes that protect this confidentiality as well as a mediation agreement which calls for confidentiality. The mediation takes place in a private conference room and not a courthouse. Mediation discussions are not admissible in any court proceeding, except for a finalized and signed mediated agreement. This requirement of confidentiality allows parties to explore settlement options with candid interaction between them and with the mediator, to frankly discuss the facts, their position, the issues and settlement options. It also facilitates the exchange of information and it encourages the parties to actively participate and “own” the mediation process.

An additional layer of privacy is provided by private caucuses or meetings the mediator may have with individual parties where they can speak in confidence to the neutral and disclose information about their true present needs and interests, perhaps acknowledging some weaknesses in their position, revealing business goals, brainstorming settlement options, and often sharing other sensitive information that may be important for the mediator to know in order to facilitate a resolution.

Also, unlike a jury verdict in a public courtroom, a mediated settlement is accomplished in a private conference room, outside the glare of publicity that most business owners wish to avoid. The resolution of the case and its terms can be kept confidential if the parties so desire.

Flexibility in the resolution process and in sculpting reasonable, creative and durable solutions

Another important difference between mediating and litigating a dispute is the flexibility available in reaching a negotiated settlement. In a lawsuit, the party who wins is usually limited to an award of money damages. In mediation, the parties will find solutions to their dispute that might not have been available in court. The range of options for business parties seeking third party assistance to facilitate negotiations is limited only by the willingness of the participants and the creativity of the parties and the mediator. A mediator may help the parties realign their focus to their actual business goals. In a dispute with customer, vendor or other business over an existing contract, a business owner may wish to negotiate a change in the terms of the contract and maintain the business relationship. That kind of non-monetary outcome is best achieved through mediation and not trial.

There are many ways in which the mediation process itself can be sculpted to the needs of the parties and the issues at hand. It begins with the basic format for the interactions among the parties and the mediator. Many neutrals will have discussions with the parties before the mediation session to help them create the most effective process for resolution. Many times the mediation session will start with a joint session with the parties. Or it can start with separate meetings with business persons and counsel. This intermingling of joint discussions and separate private caucuses will continue during the mediation session. At some points, the mediator, after conferring with counsel, may arrange for the principals to meet by themselves.

Skillful mediators regularly use further telephone communications, e-mails and other means to funnel important information into the mediation process to provide an objective foundation for negotiations. Mediators may seek submission of joint or separate materials from the parties on legal or factual issues, or reports on key technical issues.

This inherent flexibility extends to mediated settlement terms reached, embodied in a written settlement agreement that could include monetary terms, payment terms, terms to continue the business relationship, and other terms. Mediation offers an opportunity to sculpt solutions that are well beyond the limited remedies of court proceedings and judge or jury verdicts. Parties involved in the mediation process are also more likely to comply with self-formulated agreement terms rather than those imposed by a court.

Preserving and enhancing continuing business relationships

Mediating business disputes is not just about dollars and cents. It is about the relationships that exist between the people in business. A conflict does not necessarily mean the business relationship must end. Engaging in a consensus decision can allow the parties to continue their business relationship and eliminate the uncertainty or ambiguities that may be complicating an otherwise successful venture. Litigation can end otherwise profitable relationships prematurely. Many business leaders understand the importance of using mediation to build and keep good customer and employee relationships.

Mediation can restore trust where business relationships have turned sour. Parties used to be partners, used to act together to fulfill their common interests, but have now lost faith in each other. Using mediation is a method that can help restore dialogue and confidence.

Types of Business Disputes MDRS has Resolved:

While virtually any business dispute, large or small, can be effectively resolved by mediation, MDRS over the past 22 years has resolved business cases including, but not limited to:

If you are a business owner (or their counsel), and are involved in a dispute, small or large, call MDRS at (800) 536-5520 to discuss what we can do for you. There is an alternative to the time, expense, aggravation and uncertainty of going to court. Now, More Than Ever, ADR is the Answer.

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